[Public Papers of the Presidents of the United States: William J. Clinton (1998, Book II)]
[October 6, 1998]
[Pages 1742-1747]
[From the U.S. Government Publishing Office www.gpo.gov]
Remarks at the International Monetary Fund/World Bank Annual Meeting
October 6, 1998
Kosovo
Thank you very much. Secretary Rubin, my friend President Menem,
Minister Fernandez, Managing Director Camdessus, President Wolfensohn,
Dr. Ruttenstorfer, ladies and gentlemen: Before I begin my remarks, I
hope you will permit me to say a few words about another issue of real
concern to the international community, about which I have been working
already this morning, the subject of Kosovo.
I have been on the phone with many of my counterparts, and I just
was speaking with Prime Minister Blair, who is in China. We all agree
that Kosovo is a powder keg in the Balkans. If the violence continues,
it could spill over and threaten the peace and stability of Bosnia, of
Albania, of Macedonia, and other countries in the region. What is
already a humanitarian crisis could turn into a catastrophe.
Some 250,000 people have been forced to flee their homes. Of that
number, approximately 50,000 are actually homeless. As winter sets in,
they risk freezing or starving to death. President Milosevic is
primarily responsible for this crisis. The United Nations has made clear
the steps we must take to end it: declare an immediate cease-fire,
withdraw Serb security forces, give humanitarian relief groups full and
immediate access to Kosovo, begin real negotiations with the Kosovar
Albanians to find a peaceful and permanent solution to their rightful
demand for autonomy.
As we meet here, my Special Envoy, Dick Holbrooke, is meeting with
President Milosevic to reiterate what he must do and to make clear that
NATO is prepared to act if President Milosevic fails to honor the United
Nations resolutions. The stakes are high. The time is now to end the
violence in Kosovo. I hope all of you will do whatever you can to that
end.
International Monetary Fund/World Bank
Now to the matter at hand. A half century ago, a visionary
generation of leaders gathered at Bretton Woods to build a new economy
to serve the citizens of every nation. In one of his last messages to
Congress, President Franklin Roosevelt said that the creation of the
International Monetary Fund and the World Bank, and I quote, ``spelled
the difference between a world caught again in the maelstrom of panic
and economic warfare, or a world in which nations strive for a better
life through mutual trust, cooperation, and assistance.''
The Bretton Woods generation built a platform for prosperity that
has lasted down to the present day. Economic freedom and political
liberty has spread across the globe. Since 1945, global trade has grown
fifteenfold. Since 1970 alone, infant mortality in the poorest countries
is down by 40 percent; access to safe drinking water has tripled; life
expectancy has increased dramatically. Even now, despite the
difficulties of recent days, per capita incomes in Korea and Thailand
are 60 percent higher than they were a decade ago. A truly global market
economy has lifted the lives of billions of people.
But as we are all acutely aware, today the world faces perhaps its
most serious financial crisis in half a century. The gains of global
economic exchange have been real and dramatic.
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But when tides of capital first flood emerging markets, then suddenly
withdraw, when bank failures and bankruptcies grip entire economies,
when millions in Asia who have worked their way into the middle class
suddenly are plunged into poverty, when nations half a world apart face
the same crisis at the same time, it is time for decisive action.
What has caused the current crisis? First, too many nations lack the
financial, legal, and regulatory systems necessary to maintain investor
confidence in adversity. Second, new technologies and greater global
integration have led to vastly increased, often highly leveraged flows
of capital, without accompanying mechanisms to limit the boom/bust
cycle, mechanisms like those which are integral to the success of
advanced economies.
I am confident that if we act together we can end the present
crisis. We must take urgent steps to help those who have been hurt by
it, to limit the reach of it, and to restore growth and confidence to
the world economy. But even when the current crisis subsides, that will
not be enough. The global economy simply cannot live with the kinds of
vast and systemic disruptions that have occurred over the past year.
The IMF and the World Bank have been vital to the prosperity of the
world for the past half century. We must keep them vital to the
prosperity of the world for the next half century. Therefore, we must
modernize and reform the international financial system to make it ready
for the 21st century.
The central economic challenge we face is to harness the positive
power of an open international economy while avoiding the cycle of boom
and bust that diminishes hope and destroys wealth. And the central
political challenge we face is to build a system that strengthens social
protections and democratic institutions so that people everywhere can
actually reap the rewards of growth.
We must put a human face on the global economy. An international
market that fails to work for ordinary citizens will neither earn nor
deserve their confidence and support. We need both an aggressive
response to the immediate crisis and a thoughtful road map for the
future. We must begin by meeting our most immediate challenges.
Two weeks ago, at the Council on Foreign Relations in New York, I
outlined what we have done and what we must do. I am gratified that
today the leading economies speak with one voice in saying the balance
of risks have now shifted from inflation to slowdown. The principal goal
of policymakers must be to promote growth. Every nation must take
responsibility for growth.
The United States must do its part. The most important thing we can
do is to keep our economy growing and open to others' products and
services, by maintaining the fiscal responsibility that has led us to
the first balanced budget and surplus in 29 years. Winning this
discipline was not easy and was not always popular, but it was the right
thing to do. That is why I have made it clear to our Congress that I
will veto any tax plan that threatens that discipline.
Also, the United States must--must--meet our obligations to the IMF.
I have told Congress we can debate how to reform the operations of the
fire department, but there is no excuse for refusing to supply the fire
department with water while the fire is burning.
Europe must continue to press forward with growth-oriented economic
policies and keep its markets open. And Japan, the world's second
largest economy and by far the largest in Asia, must do its part, as
well. The United States values our strong partnership with Japan, our
political, our security, our economic partnership. But now the health of
Asia and, indeed, the world depends upon Japan. Just as the United
States had to eliminate its deficits and high interest rates which were
taking money away from the rest of the world over the last 6 years, now
Japan must take strong steps to restart its economic growth by
addressing problems in the banking system so that lending and investment
can begin with renewed energy and by stimulating, deregulating, and
opening its economy.
For all of us, there can be no substitute for action. And all of us
must also act now to restart growth in the rest of Asia by helping to
restructure firms paralyzed by crushing debt and replace debt with
equity across entire economies. Through OPIC and the Export-Import Bank,
we are providing short-term credit and investment insurance to keep
capital flowing into emerging economies.
I welcome Japan's announcement that it will contribute to the
reconstruction effort. And I am gratified that the World Bank has agreed
to double its investment in the social safety net in Asia to help those
who have been harmed by the economic crisis.
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In all these ways, we can minimize the consequences of the current
financial contagion. But the flash of this crisis throws new light on
the need to do more, to renew the institutions of international finance
so they reflect modern economic reality. The institutions built at
Bretton Woods must be updated for 24-hour global markets if they are to
continue to achieve the goals established by the Bretton Woods
generation.
First, we must recognize that the free and open exchange of ideas
and capital and goods across the globe is the surest route to prosperity
for the largest number of people. But we must find a way to temper the
volatile swings of the international marketplace, just as we have
learned to do in our own domestic economies.
What is troubling today is how quickly discouraging news in one
country can set off alarms in markets around the world. And all too
often, investors move as a herd, with sweeping consequences for emerging
economies with weak and strong policies alike. We've all read of
families that worked hard for decades to become middle class, families
that owned homes and cars, suddenly forced to sell off their possessions
just to buy food. We've read of doctors and nurses forced to live in the
lobby of a closed hospital. With fuel and food shortages in some
countries, the onset of winter threatens mass misery. And in Asia, where
the ethic of education is deeply ingrained and has led to the rise of
tens of millions of people, and strong schools are the pride of nations,
we now see too many children dropping out of school to help support
their families.
Just as free nations found a way after the Great Depression to tame
the cycles of boom and bust in domestic economies, we must now find ways
to tame the cycles of boom and bust that today shake the world economy.
The most important step, of course, and the first step, is for
governments to hold fast to policies that are sound and attuned to the
realities of the international marketplace. No nation can avoid the
necessity of an open, transparent, properly regulated financial system,
an honest, effective tax system, and laws that protect investment. And
no nation can for long purchase prosperity on the cheap, with policies
that buy a few months of relief at the price of disaster over the long
run.
That is why I support the fundamental approach of the IMF. The
international community cannot save any nation unwilling to reform its
own economy; to do so would be to pour good money after bad. But when
nations are willing to act responsibly and take strong steps, the
international community must help them to do so.
Too often, what has appeared to be a thriving market system,
however, has masked an epidemic of corruption or cronyism. Investors and
entrepreneurs, foreign and domestic, will not keep their money in
economies where prosperity is a facade. Bank balance sheets should mean
the same thing in one country as another. Contracts should be awarded on
merit. Corruption cannot be tolerated.
To this end, I applaud the working group reports that call for the
IMF to examine and publicize countries' adherence to strong
international standards, as well as higher accounting and loan standards
for private institutions. The United States will continue to press for
new ways the private sector can implement sound practices, for example,
through an accreditation system for national bank examiners.
But while strong policies and sound business practices within each
nation are essential, at times they simply will not be enough. For even
the best functioning markets can succumb to volatility, soaring in
unrealistic expectations one minute, followed by a sudden crash when
reality intervenes. Such miscalculations of risk are an inevitable fact
of market psychology.
In our own domestic economies, we have learned to limit these swings
in the business cycle. In the United States, for example, a strong
Federal Reserve has ensured a stable money supply. The Securities and
Exchange Commission promotes openness and makes the market work.
Rigorous bank regulation and deposit insurance have helped to keep
downturns in the business cycle from spinning out of control. Other
nations have their own institutions performing these same functions.
Now, though we understand that the realities and the possibilities
in the international marketplace are different, some of the same
functions clearly need to be performed. We must address not only a run
on a bank or a firm but also a run on nations. If global markets are to
bring the benefits we believe they can, we simply must find a way to
tame the pattern of boom/bust on an international scale. This task is
one of the most complex we face. We must summon our most creative minds
and carefully consider
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all options. In the end, we must fashion arrangements that serve the
global economy as our domestic economies are served, enabling capital to
flow freely without the crushing burdens the boom/bust cycle brings.
While we must not embrace false cures that will backfire and lead in
the end to less liquidity and diminished confidence when we need more of
both, we must--we must--keep working until we find the right answers.
And we don't have a moment to waste.
Meanwhile, we must find creative ways to protect those countries
that right now have strong economic policies, yet still face financial
pressures not of their own making. This past weekend Secretary Rubin and
Chairman Greenspan have worked with their G-7 counterparts to find new
ways to strengthen our cooperation based on the IMF to make
precautionary lines of credit available to nations committed to strong
economic policies, so that action can be quick and decisive if needed.
This is a critical way to prevent the present crisis from reaching Latin
America and other regions, which are doing well. And I ask your support.
Strong government policies, sound business practices, new ways to
limit the swings in the global market--all these steps are needed to
ensure growth into the future. But let us also acknowledge that we face
a political challenge. For the best designed international economic
system will fail if it does not give a stake and a voice to ordinary
citizens.
So I say again, today we see a profound political challenge to the
global economic order. The financial crisis poses a stern test of
whether democracies are capable of producing the broad public support
necessary for difficult policies that entail sacrifice today for
tomorrow's growth. I believe strong democracy, fair and honest
regulation, sound social policy are not enemies of the market. I believe
they are essential conditions for long-term success. Nations with freely
elected governments, where the broad mass of people believe the
government represents them and acts in their interests, have been
willing and able to act to ward off crisis. Korea and Thailand, with
elected leaders who have been willing to take very difficult steps, have
succeeded in weathering the worst of the economic storm when so many
others have not. Countries in central Europe have done remarkably well.
But even among the strongest nations, as we have found here in our
own, broad change is often difficult. Unless the citizens of each nation
feel they have a stake in their own economy, they will resist reforms
necessary for recovery. Unless they feel empowered with the tools to
master economic change, they will feel the strong temptation to turn
inward, to close off their economies to the world.
Now, more than ever, that would be a grave mistake. At a moment of
financial crisis, a natural inclination is to close borders and retreat
behind walls of protectionism. But it is precisely at moments like this
we need to increase trade to spur greater growth.
Again, we must never lose sight of what the fundamental problem is:
We need more liquidity, more growth in this world today. Only by tearing
down barriers and increasing trade will we be able to bring the nations
of Asia, Latin America, and other parts of the world back onto the path
of growth.
The world economy today needs more trade and more activity of all
kinds, not less. That is why when the leaders of APEC meet next month,
we must press forward to tear down barriers and liberalize trade among
our countries; why next January when the United States Congress returns,
we will seek a comprehensive effort to tear down barriers at home and
around the world, including new negotiating authority and legislation to
expand trade with Africa.
But unless we give working people a strong stake in the outcome,
they will naturally and understandably erect obstacles to change. The
answer to these difficulties is not to retreat. It is to advance and to
make certain every nation has a strong safety net providing the security
people need to embrace change.
At the very least, people who are suddenly without work must have
access to food and shelter and medical care. And over time, all nations
must develop effective unemployment and retirement systems. We must find
ways to keep schools open and strong during times of economic downturn.
We must make certain economic development does not come at the cost of
new environmental degradation.
I am pleased that the World Bank will be redoubling its efforts to
build this strong safety net, especially in Asia. And I urge all
international financial institutions to do more to incorporate
environmental issues into your operations and to significantly increase
direct lending for environmental and natural resource projects. Every
time we seek to protect the environment,
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shortsighted critics warn that it will hurt the economy. But over the
last quarter century, we have seen time and again, in nation after
nation, that protecting the environment actually strengthens, not
weakens, our economies.
International institutions themselves must reinforce the values we
honor in our own economies. In Geneva last May I asked the World Trade
Organization to bring its operations into the sunlight of public
scrutiny, to give all sectors of society a voice in building trade
policies that will work for all people in the new century. We must do
the same for other multilateral institutions.
When the IMF agrees with a member country on policy measures to
restore stability, the people of that country and investors around the
world should be told exactly what conditions have been set. Therefore, I
urge the WTO, the World Bank, and the IMF, working with the ILO, to give
greater consideration to labor and environmental protections as a part
of your daily business. Only by advancing these protections will these
organizations earn the confidence and support of the people they were
created to serve.
Finally, though we are seized with the crisis of the moment, we must
not neglect those whom the capital flows have passed by in the first
place. That is why it is critical to continue our efforts to lighten
debt burdens, to expand educational opportunities, to focus on basic
human needs, as we work to bring the poorest countries in Africa and
elsewhere into the international community of a thriving economy.
Creating a global financial architecture for the 21st century,
promoting national economic reform, making certain that social
protections are in place, encouraging democracy and democratic
participation in international institutions--these are ambitious goals.
But as the links among our nations grow ever tighter, we must act
together to address problems that will otherwise set back all our
aspirations. If we're going to have a truly global marketplace, with
global flows of capital, we have no choice but to find ways to build a
truly international financial architecture to support it, a system that
is open, stable, and prosperous.
To meet these challenges I have asked the finance ministers and
central bankers of the worlds' leading economies and the world's most
important emerging economies to recommend the next steps. There is no
task more urgent for the future of our people. For at stake is more than
the spread of free markets, more than the integration of the global
economy. The forces behind the global economy are also those that deepen
liberty, the free flow of ideas and information, open borders and easy
travel, the rule of law, fair and evenhanded enforcement, protection for
consumers, a skilled and educated work force. Each of these things
matters not only to the wealth of nations but to the health of nations.
If citizens tire of waiting for democracy and free markets to deliver a
better life for themselves and their children, there is a risk that
democracy and free markets, instead of continuing to thrive together,
will shrivel together.
This century has taught us many lessons. It has taught us that when
we act together we can lift people around the world and bind nations
together in peace and reconciliation. It has also taught us the dangers
of complacency, of protection, of withdrawal. This crisis poses a
challenge not to any one nation but to every nation. None of us--none of
us--will be unaffected if we fail to act.
On the day he died in 1945, as these institutions were taking shape,
President Roosevelt wrote in the last line of his last speech: ``The
only limit to our realization of tomorrow will be our doubts of today.
Let us move forward with a strong and active faith.'' At a time of
testing, the generation that built the IMF and the World Bank moved
forward with a strong and active faith.
Now we who have been blessed with so many advantages must ourselves
act in the same manner. If we do, we will surmount the difficulty of
this moment. We will build a stronger world for our children. We will
honor our forebears by what we do to construct the first 50 years of the
21st century.
Thank you very much.
Note: The President spoke at 10:52 a.m. in the ballroom at the Marriott
Wardman Park Hotel. In his remarks, he referred to President Carlos
Menem and Minister of Economy, Public Works, and Services Roque
Fernandez of Argentina; Michel Camdessus, Managing Director and Chairman
of the Executive Board, International Monetary Fund (IMF); James D.
Wolfensohn, President, International Bank for Reconstruction and
Development (World Bank); State Secretary in the Austrian Finance
Ministry Wolfgang
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Ruttenstorfer, Chairman of the Board of Governors, IMF; Prime Minister
Tony Blair of the United Kingdom; President Slobodan Milosevic of the
Federal Republic of Yugoslavia (Serbia and Montenegro); and Special
Envoy Richard C. Holbrooke, the President's nominee to be U.S.
Ambassador to the United Nations. The President also referred to the
International Labor Organization (ILO) and the Overseas Private
Investment Corporation (OPIC).